This document discusses plans to finance a 16 mile light rail transit (LRT) line in Maryland through a public-private partnership (P3). The $2.4 billion project would be financed with approximately one-third private funding and two-thirds public funding. A concessionaire would design, build, finance, operate and maintain the line over a 35 year period in exchange for progress payments during construction and availability payments that cover operations and maintenance over 30 years. The P3 approach aims to transfer risks, encourage whole-life cost optimization, and provide incentives for innovation and schedule discipline compared to traditional project delivery. Coordination is outlined between the P3 process, federal funding through the FTA New Starts program, and a TIFI
3. •16 mile LRT line
•21 stations
•74,000 daily riders
4. Dilemma: How to Cover the State Share?
StateFederal
County
Total capital cost
$2.4 billion
5. An Old Standby and A New Opportunity
Maryland Transportation Trust Fund
Supports Maryland’s entire transportation
program – transit, highways, airports, ports
Replenished by Transportation
Infrastructure Investment Act of 2013
• Generates $4 billion in additional funding over
six years
• Indexed key revenue sources to inflation,
including gas tax and transit fares
Maryland Public-Private Partnership
legislation
Created a stronger, more predictable,
streamlined process for future P3 projects
6. Transit P3 Basics
Precedent from Europe, Asia, Australia, Canada
U.S. projects based primarily on Canadian experience
Combines the design, construction, financing,
operations and maintenance into one umbrella
(“DBFOM”) contract
Shares risk between owner and a concessionaire
Allows concessionaire to manage costs and innovate
to mitigate risk and earn return on investment
5 year construction + 30 year O&M period
Based on performance standards not detailed
specifications
Payments are tied to construction cost, financing,
capital renewal and operating performance
Handback standards protect long-term public interest
Concessionaire selected through competitive
process with “best value” selection criteria
7. P3 Capital Funding Sources
Private Funding
(e.g., TIFIA Loan,
Private Activity
Bonds, Bank Loan)
~1/3rd
Public Funding
(e.g., FTA New Starts,
State Funds, Local
Funds)
~2/3rds
Concessionaire Equity
Concessionaire
Borrowed
Funds
Construction
Progress Payments
Planning/ Preliminary
Engineering /Right of Way
8. Typical Scope of a Transit P3
Concessionaire
responsible for:
Final Design
Construction of
Purple Line and
some 3rd party
improvements
Financing the
project (in part
using public
funding
contributions)
Owner responsible
for:
Acquiring right of
way
Public outreach
Owner quality
assurance
Concessionaire responsible for:
Operations, maintenance, and capital renewal/replacement
Asset handback requirements at end of P3 term
Owner responsible for:
Fare policy, specification of minimum amount of service
Ridership and fare revenue risk
Electricity costs
Police protection
O&M and Capital RenewalDesign and Construction
< 30 Years >< Approx. 5 Years >
9. How Does the Concessionaire Get Paid?
Progress Payments
paid monthly for up
to 85% of earned
construction value,
subject to annual
caps
Revenue Service
Availability payment
of $100M-$500M
made upon
achieving RSA
Availability Payments
O&M and Capital RenewalDesign and Construction
< 30 Years >< Approx. 5 Years >
10. Schedule of Payments to Concessionaire
Financial
Close
Construction Phase
Revenue
Service
Availability
Progress
Payment
Concession
Ends
Operating Phase
Progress
Payment
Availability
Payment
Availability
Payment
. . .. . .
11. Availability Payments
APs are performance
payments in the O&M term
AP amount is tied to the
concessionaire’s
performance
Owner makes deductions if
the concessionaire doesn’t
meet performance standards
APs cover
O&M
Capital renewal &
replacement
Repayment of private debt
Operations &
Maintenance
Capital Renewal
& Replacement
Repayment of
Private Debt &
Return to Equity
12. Conceptual Cash Flow: DB vs P3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
NetAnnualCashFlow
Year
DB P3
Construction peak
year
Planning,
design,
procure-
ment
Intermittent
capital renewal
and replacement
O&M phase;
increased service
level
O&M phase;
initial service
level
13. Preliminary
analyses; industry
outreach
Value for Money
analysis
Internal project
delivery workshops
Request for
Information to the
P3 market
Industry Forum
P3 screening
process and
analysis
Pre-Solicitation
Report to MD
Stakeholders
P3 solicitation
approach
approved by Board
of Public Works
Request for
Qualifications
Process to Determine P3 Potential
14. Why a P3 on Purple Line?
Operational factors
Increase likelihood of consistently excellent, highly responsive service;
natural stand-alone asset
Risk transfer efficiencies
Integrate various elements into a single agreement that clearly outlines
optimal allocation of project risk between the public and private partners
Whole life-cycle planning and cost optimization
Provide greater incentive to make investment decisions that are optimized
over life of asset
Schedule discipline
Create strong incentives for concessionaire to maintain schedule discipline
during project delivery and startup
Enhanced opportunities for innovation
Offer the private sector with opportunities and incentives to propose
enhancements to the design and delivery approach that could benefit long-
term O&M performance
Potential financial value
Due to operational benefits, risk transfer efficiencies, life-cycle planning,
scheduling discipline, and innovation opportunities of the P3 approach, there
is potential for long-term financial value relative to a traditional project
delivery approach
15. FTA Integration
Federal share will be New Starts funds
MTA will use federal funds for progress payments
Approach keeps administration of the FTA simpler and assures earned value
meets or exceeds federal investment
Since FTA may be spread over 8-10 years, MTA will front fund the federal share
FTA funding is important component of financial plan, but…
P3s require financial close (closing the deal and executing loans) on a timely
basis, and
FTA process not designed for P3s
MTA approach is to work with FTA to begin key New Starts reviews
early, before bids are submitted
16. TIFIA Integration
TIFIA loan will generate significant savings
Estimated savings is >$30M per year over life of
concession
First transit P3 w/ a private TIFIA loan
TIFIA has independent approval process
To simplify process for TIFIA and create level field for
bidders, MTA negotiated draft Term Sheet with TIFIA
Each proposer has option to bid to the term sheet
17. Pulling It All Together
FinancialClose
Commercial
Close
Preferred
ProposerID’d
ProposalsDue
FinalRFPIssued
DraftRFPIssued
ShortlistIssued
RFQIssued
Presolicitation
Report
IndustryForum
RFIIssued
P3
Solicitation
Process
TIFIA
Process
LetterofInterest
CreditReview
Initiated
Indicative
Rating
Prelim.Term
SheettoBidders
CreditCouncil
Q&ASession
w/Bidders
LoanExecuted
BorrowerInfo
Submitted
BeginFinancial
Assessment
FFGA
Congress.Review
Confirm/Finalize
Reports
BeginRisk
Assessment
NEPAROD
FFGARec’in
AnnualReport
FEIS
Published
FTA
NEPA and
New Starts
Processes
OMBReview
FinalizeFFGA&OSTReview
18. Contact
Henry Kay
Director, Transportation Planning
RK&K | hkay@rkk.com
Jeff Ensor
Director, Project Delivery & Finance
Maryland Transit Administration | jensor@mta.maryland.gov